California paves road for ridesharing

Rules for ridesharing start-ups could set national model

Hiis Ilma, a driver for UberX, chats with rider Holly Stavnes in Little Italy. The for-profit ridesharing company is one of several in San Diego County that connects drivers and passengers via a smartphone app.| Photo by John Gastaldo/U-T San Diego

Hiis Ilma, a driver for UberX, chats with rider Holly Stavnes in Little Italy. The for-profit ridesharing company is one of several in San Diego County that connects drivers and passengers via a smartphone app.| Photo by John Gastaldo/U-T San Diego

State officials are set to vote Thursday on what could become a national model for how to regulate the increasingly popular – and controversial – smartphone-based ridesharing industry.

Outfits such as UberX, Lyft and Sidecar have become a hip alternative to hailing a taxi in San Diego County and across the country. Customers download a smartphone app, punch in a requested destination and watch their driver approach in real time.

Passengers who use UberX, Lyft, Sidecar and other ridesharing companies download a smartphone app to connect with drivers. Photo by John Gastaldo/U-T San Diego.

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Passengers who use UberX, Lyft, Sidecar and other ridesharing companies download a smartphone app to connect with drivers. Photo by John Gastaldo/U-T San Diego.

The companies market themselves as more convenient and less expensive than using a cab. Ridesharing drivers have an average response time of about five or six minutes and offer a no-cash payment system that emails a receipt to riders, several of the businesses said.

Critics, including the taxi industry, however, said the ridesharing sector has gotten a free ride from government regulators.

Ridesharing companies say their self-policing is rigorous and that traditional competitors are just worried about a superior model of business that targets tech-savvy passengers. But there are no statewide rules requiring a DMV or criminal background check for drivers. And no agency ensures these businesses charge consistent fares or regularly inspect and maintain their vehicles.

Such concerns have led to lawsuits and other efforts to stop or curtail ridesharing in certain regions, including San Diego County and Los Angeles. The California Public Utilities Commission is the first statewide body in the United States to consider comprehensive regulation of this industry.

In December 2012, the agency began drafting a host of proposed rules on safety, training and other operations. The five-member commission, which oversees everything from railroads to power companies, is scheduled to discuss the issue on Thursday in San Francisco.

Several ridesharing companies reached by U-T San Diego said they've pushed for a streamlined set of rules, but are generally supportive of regulation because it will legitimize their operations.

“This is definitely a step forward and it’s going to strengthen our industry,” said Christopher Ballard, general manager of Uber San Diego, which offers both a low-cost ridesharing service and luxury transportation.

Ballard said ridesharing companies hope state monitoring will put an end to questions over the legitimacy of the service raised by several municipalities. In June, the Los Angeles Transportation Department, for example, issued a cease and desist letter to Uber, Lyft and Sidecar citing violations of city ordinances. The companies have remained in operation under temporary agreements with the CPUC.

In July, the San Diego Metropolitan Transit System, which regulates taxis in the San Diego region, warned the public that the companies “are not subject to any government regulations or vetting.”

“This is a safety issue for both passengers and drivers,” said Bill Kellerman, who manages taxi oversight for MTS.

Unlike taxi operators, the drivers of the ridesharing cars don’t have two-way radios or emergency lights atop their cars to alert authorities when their safety is at risk, Kellerman added.

In the San Diego region, taxi companies and individual taxi permit holders must pass background checks; show proof of insurance and license their drivers through the county’s sheriff’s department, according to MTS. That agency provides additional regulation by implementing a standard rate of fare, providing field inspections of vehicles and overseeing a driver complaint process.

The taxi market in San Diego is currently restricted, with a limit of 993 cabs allowed to pick up passengers in the city. MTS charges $3,000 for taxi permits. Those permits, however, are privately sold by holders for tens of thousands of dollars each on the secondary market.

At least one independent transportation expert said she feels the new ridesharing companies will stick around regardless of the new rules.

“There appears to be a strong appetite among the public for these services,” said Susan Shaheen, who specializes in the study of traditional ridesharing, or carpooling, and is an engineering professor at UC Berkeley’s Transportation Sustainability Research Center.

“Wherever there’s been a reaction against these companies, the public has come back and said we want these services.”

Shaheen said her center has asked the CPUC not to burden traditional ridesharing platforms -- those that don’t operate as for-profit companies focused on providing rather than sharing rides -- with the host of rules.

The for-profit ridesharing model kicked into high gear in 2012 with the launch of San Francisco based companies Lyft and Sidecar. Uber, also based in San Francisco, started in 2009 with its luxury rides and added lower-cost service in 2012.

The industry has spread from the West Coast to dozens of cities across the United States, from New York to Chicago to Charlotte. Much of the San Diego region’s ridesharing is offered in downtown, Little Italy and Hillcrest, with some service provided in outlying suburban cities.

Drivers work as independent contractors for the ridesharing companies and pay the businesses about 20 percent of each fare. They own, insure and maintain their own cars and often live in communities where they work.